A huge deal in the making…
One company is aiming to purchase your favorite coffee shop.
One of your favorite coffee brands could be making a big decision soon. Dunkin’ Brands, the parent company of Dunkin’ and Baskin-Robbins, is in preliminary discussions to be acquired by private equity-backed Inspire Brands.
The pandemic has taken a toll on almost every company out there, and those in the coffee industry are no different. Coffee Drinkers’ routines were interrupted. And with extra time on their hand, many began to learn how to brew their own. This hurt Dunkin’s numbers, and it sent same-store sales in the U.S. down 18.7% in the second quarter.
But this drop in sales was aided by drive-thru lanes and a constant stream of promotional measures – including partnerships and limited-time coffee options.
Where’s the money?
Despite the 18.7% drop in sales – Dunkin’ fared better than its well-known rival Starbucks. The coffee retailer reported a massive decline in sales, totaling nearly 40% down from the last quarter. And that’s where the company caught the eye of Inspire.
Inspire is known to hold a handful of large names, including Arby’s and Jimmy John’s. But Dunkin’s business is proving to be much healthier than Inspire’s other publicly traded acquisitions – which makes this deal a big task for the company.
Inspire is predicted to purchase Dunkin’ Brands (DNKN) at $106.50 per share. That would make the deal worth roughly $8.8 billion. This deal’s talks led the stock to jump nearly 16% – reaching an all-time high of $104.87.
And here’s what I think about that sudden rush of investors trying to get their piece…
How do I get some?
I think this was an interesting move by Dunkin’, seeing that they, along with most big foodservice chains, have struggled to keep business steady due to the pandemic. But the critical difference between Dunkin’ and those other struggling chains is that Dunkin’ has gone the extra mile to direct traffic to their drive-thru.
For instance, the company struck up a partnership with one of the biggest stars on TikTok – which drove many to go out of their way to try the drink due to its limited availability. They ran promotional deals that caught the eye of consumers.
Dunkin’ did everything right.
But that doesn’t mean I’m rushing to get my money into the stock. Because Dunkin’ isn’t the only company that is succeeding with a strong drive through presence. And for me, that means we could see more consolidation in this space in the near future. And that’s why I’ll be holding off on jumping into the first significant acquisition to hit this sector. I’ll be sure to keep you updated on what I see next.
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In the spotlight: 2020 – the year of IPO…
2020 has been an uncertain year, but that hasn’t slowed down companies from launching initial public offerings. And now, Ant Group, a Chinese financial technology company, is looking to raise $34.5 billion in its dual IPO, making it the biggest listing of all time.
This IPO will bring the company value to about $310 billion. Now, the previous record for a stock-market listing was held by Saudi state oil company Aramco, which raised $29.4 billion in an offering on the Riyadh exchange last December. So, as you can see, an IPO at this size is groundbreaking.
And it’s no surprise that Ant is the one to set this record. Ant is one of the biggest technology firms, not only in China but in the world. And on top of that, it happens to be the most used online payment platform in China. The app has established its presence in every aspect of China’s financial life, from investment accounts and micro-savings products to insurance, credit scores, and even dating profiles.
The firm’s payments app Alipay had 731 million monthly active users as of September, Ant said in regulatory filings. The platform handled 118 trillion yuan ($17.7 trillion) in payments in the 12 months through June.
So, needless to say, I’m excited to see what this record-breaking IPO will do.
Daily Action Plan (livestream recap)